Homeowners are unlikely to get further interest-rate relief unless the global economy takes a turn for the worse.
Economists say the minutes of the Reserve Bank of Australia’s (RBA) August 7 board meeting suggest interest rate cuts are off the central bank’s agenda in the short term.
The minutes, released on Tuesday, show that positive signs in the Australian and Chinese economies contributed to the RBA’s decision to keep the cash rate on hold at 3.5 per cent.
Economic growth appeared to be stabilising in China – Australia’s biggest trading partner – while there were signs recent interest rate cuts were already providing a boost to the local economy, the RBA said.
Commonwealth Bank chief economist Michael Blythe said the RBA appeared to be more positive about the economic outlook and further interest rate cuts appeared unlikely.
“There’s certainly nothing there which suggests they are ready to pull the trigger again, we’re in that kind of wait-and-see phase,” he said.
However, the RBA had room to cut again if the global economy took a turn for the worse.
“There is still that big offshore uncertainty, which suggests that if they are going to change rates soon it’s still more likely to be down than up,” he said.
The RBA last cut the cash rate by a quarter of a percentage point in June, following a half a percentage point cut in May.
With the economy growing at around trend, JP Morgan Australia chief economist Stephen Walters said it would be hard to see the RBA cutting the cash rate again in the next few months.
“We’ve learned over the past couple of years that things change pretty quickly, but it would take some pretty fundamental shifts in markets or domestically to get them to move,” Mr Walters said.
“That may happen. In fact we are still forecasting them cutting rates towards the end of the year but they are clearly in no rush.”
He said it would probably take a combination of fresh signs of trouble in Europe’s sovereign debt crisis, weaker domestic data and further rises in the Australian dollar to persuade the RBA to move again.
“I think you would need a combination of all three.”
